From the Guardian News Paper – A transport tax would get us moving

We should take a leaf out of France’s book and ask employers to help rehabilitate our ailing transport system

Rob Williams

In many European countries, there is an understanding that transport is important to a modern economy. Here in Britain, transport might occasionally become a key issue when petrol prices shoot up and the government doesn’t reduce fuel duty quickly enough, or when the trains grind to a complete halt – but that’s not enough.

It’s now two years since one of the two consortiums involved in the public private partnership project to renew the London underground collapsed, leaving Transport for London with a hefty bill and Gordon Brown with egg on his face.

Funding of the rest of the tube upgrade work remains uncertain and there are continuing doubts about the Tories’ commitment to building London’s Crossrail. Although construction started in May, there is still uncertainty about whether this project will ever be completed.

In other parts of the country, notably Leeds, Liverpool and Portsmouth, proposed tram schemes were scrapped by the Labour government, after millions of pounds had been spent developing the plans, in large part because of the uncertainties about costs and funding. If funding was one of the main impediments – even before the credit crunch – to providing a public transport system fit for the 21st century, then maybe we should look across the Channel to see why the French have one of the best local transport networks in the world. Those who gain from a good public transport should pay something towards it. As the International Association of Public Transport (UITP) says, “employers and retailers both gain from the provision of public transport services which give them access to a wider labour market and retail market respectively”. The most important source of funding for local public transport projects in France is the versement transport (transport tax), or VT for short.

The tax, which applies only to companies with more than nine employees, takes up to 1% of their payroll. The rate may be increased if the transport authority plans to implement, or has already implemented, a service – metro, tramway or busway. In those cases, the rate may be raised to 1.75% (and higher in the Ile de France/Paris region) and so is designed to take more from larger employers. Since 1992 all French transport regions with more than 20,000 inhabitants have had the right to introduce the VT. This tax can only be used for public transport investment, and can also help to pay operational costs.

As a report for the Passenger Transport Executive Group said, the amount of locally generated funding can be staggering: “As an example, the local transport authority in Lyon – a city roughly the size of greater Sheffield – applied a VT rate of 1.63% in 1999, which generated over £105m for investment and operations of public transport in that year alone.”

Most importantly, the VT contributes to long-term stability in public transport funding, which we do not have in the UK. Studies in France have confirmed that the VT does not have a significant effect on labour costs, nor on company location. It has a very limited taxation impact (less than 1% of the overall French tax burden). It is a powerful tool for financing and developing public transport in France, which is why the VT has been introduced in more than 85% of urban areas. Almost 40% of the costs of public transport in France are financed by the VT.

In the UK, governments have consistently failed to grasp the fact that an integrated transport policy is a major element of urban development and regeneration. Few, if any, leading politicians fully understand that good public transport facilities can improve social mobility, enabling people in poorer areas travel to work in more prosperous parts of their region.

Good transport links are also crucial to the prosperity of private companies. In London, the City’s workforce is almost wholly dependent on public transport to get them to and from the office. Growth and international competitiveness are dependent upon good transport infrastructure.

Despite the credit crunch, the UK, and especially London, is awash with money. Companies in the City regularly state that without improvements in public transport, they may be forced to relocate elsewhere.

This is surely an opportunity for Lord Adonis, a transport minister who actually seems to have a vision, to demand that employers around the country put their money into the pot, and make a real contribution to getting our cities moving again.